2021 (10) TMI 673 - AT - Income Tax

Revision u/s 263 by CIT - validity of the revision order passed beyond the period of limitation prescribed u/s 263(2) - reopening of assessment u/s 147 commenced in the case of assessee - HELD THAT - As reopening of assessment as contemplated under section 147 of the Act is for the specific purpose of assessing the escaped income - in a reassessment proceeding, the assessing officer can only assess that income which has escaped assessment. The income which is subject matter of assessment in the original assessment proceedings or which was in the domain of the assessing officer in course of original assessment proceedings certainly cannot be considered in the re-assessment proceedings - If at all, any order which can be considered to be erroneous and prejudicial to the interest of revenue for non consideration of the issues raised by learned PCIT, certainly, it has to be the original assessment order passed u/s 143(3) of the Act and not the re-assessment order passed u/s 143(3) r.w.s. 147 - PCIT could have exercised her powers u/s 263 of the Act only in respect of the original assessment order passed under section 143(3). As the original assessment order having been passed on 06-02-2014, the impugned order passed under section 263 of the Act is barred by limitation in view of section 263(2) of the Act. At this stage, we consider it our duty to deal with the submissions of learned departmental representative that the assessee did not represent its case before learned PCIT and did not raise the issue of limitation. On perusal of records, it is seen that learned PCIT issued the show cause notice under section 263 of the Act on 08-03- 2021 and passed the impugned order on 19-03-2021 with undue haste. In fact, the assessee has raised specific grounds before us, being grounds 8 and 9, to the effect that neither hearing notice was issued to the assessee nor any opportunity of being heard was provided. - Decided in favour of assessee.

Issues Involved:
1. Validity of the revision order passed beyond the period of limitation prescribed under section 263(2) of the Income Tax Act, 1961.
2. Examination of whether the assessing officer could have inquired into issues not forming part of the reasons recorded for reopening the assessment.
3. Consideration of whether the original assessment order or the re-assessment order should be revised under section 263.

Detailed Analysis:

Issue 1: Validity of the Revision Order Beyond Limitation Period
The appellant challenged the validity of the revision order passed by the Principal Commissioner of Income Tax (PCIT) on the grounds that it was beyond the period of limitation prescribed under section 263(2) of the Income Tax Act, 1961. The appellant argued that the original assessment order was passed on 06-02-2014, and the PCIT's revision order dated 19-03-2021 was beyond the permissible period.

The tribunal noted that the PCIT issued a show cause notice under section 263 on 08-03-2021 and passed the impugned order on 19-03-2021. The tribunal found that the revision order was indeed barred by limitation as per section 263(2) of the Act. Consequently, the tribunal declared the revision order invalid and restored the original assessment order.

Issue 2: Examination of Issues Not Forming Part of Reopening
The PCIT held the assessment order passed under section 143(3) read with section 147 as erroneous and prejudicial to the interest of revenue because the assessing officer did not inquire into two specific issues: (1) Non-deduction of tax on payments made to contractors and professional fees aggregating to ?2,56,529/-, and (2) Cash deposit of ?31,95,28,429/- in the savings bank account.

The tribunal observed that the reopening of the assessment was for the specific purpose of assessing the escaped income of ?2,00,50,000/-, being the contribution received from members transferred to the reserve. These issues were neither part of the reasons recorded for reopening nor did they come to the notice of the assessing officer during the reassessment proceedings. The tribunal clarified that in reassessment proceedings, the assessing officer can only assess income that has escaped assessment and not issues that were part of the original assessment proceedings.

Issue 3: Consideration of Original vs. Re-assessment Order for Revision
The tribunal referred to the Supreme Court's decision in CIT vs. Alagendran Finance Ltd., which held that the period of limitation for revising an order under section 263 would begin from the date of the original assessment order if the issues raised were not part of the reassessment proceedings. The tribunal further cited the Bombay High Court's decision in Ashoka Buildcon Ltd vs. ACIT, which supported this interpretation.

The tribunal concluded that the PCIT could only exercise revisionary powers under section 263 concerning the original assessment order, not the reassessment order. Since the original assessment order was passed on 06-02-2014, the revision order dated 19-03-2021 was beyond the limitation period.

Conclusion:
The tribunal allowed the appeal, declaring the revision order passed under section 263 as invalid due to being barred by limitation. The original assessment order was restored, and other grounds raised by the assessee were not adjudicated as they became academic. The order was pronounced on 12/10/2021.

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